Market Report: Regus boosted by rumours of US takeover

By Michael Jivkov
Wednesday 03 July 2013 03:36

Regus was back on traders' buy lists yesterday as rumours of a 135p-a-share bid for the office space group circled City dealing rooms. As for who is likely to be interested in the company, market professionals offered the names of financial players who might be tempted to pounce on the group. Among them were the US private equity giants Blackstone, Kohlberg Kravis Roberts, and GE Capital.

Speculation of a bid for Regus is by no means new. Last month the talk pushed shares in the office space group to a high of 124p. But they retreated quickly from this peak, the main reason for the drop being the fact that the financier Robert Bonnier has been forced to reduce his substantial stake in the group after struggling to pay margin payments on his position. Mr Bonnier holds his stake in Regus via contracts for difference, a derivative which allows punters to gain significant exposure to a company's shares with a relatively small outlay of cash. Regus shares closed up 9.5p at 101.5p

In the FTSE 100, which rose 17 points to 4,893, ITV was in demand thanks to positive comments from UBS. Repeating its "buy" stance on the broadcaster, UBS played down worries about an advertising slowdown in the UK and reminded investors the company will be a major beneficiary from the migration to digital TV. It set a 165p price target on the stock.

Shire Pharmaceuticals fell 2p to 556.5p as the company was heard warning analysts that its Adderall XR product for hyperactive children might face competition from a new copycat rival by October. Most analysts expect the first rival launch to happen in the middle of next year. Oxford BioMedica rose 1.75p to 31.75p after the biotech group said it would present new trial data for its TroVax cancer treatment to the American Society of Clinical Oncology at the weekend.

Sportingbet fell 11p to 263.5p, in heavy volume, on worry that growing competition from rival online gaming sites will soon start to eat into earnings at the group. Retailers recovered some lost ground. MFI Furniture gained 4.25p to 105.25p, WH Smith added 11.25p to 348p, Carpetright gained 32p to 840p and Signet firmed 4.25p to 99.5p.

Thus rose 0.75p to 13.75p after Dresdner Kleinwort Wasserstein was heard tipping the telecoms group as a possible takeover target. Although the German-owned broker believes profits at Thus are likely to remain under pressure for the time being, it takes the view that bid speculation will support the company's shares, especially given the recent decision by Columbia Venture to raise its stake in the group. The US venture capital firmed disclosed this week it controls 10.3 per cent of Thus.

Among small caps, Integrated Asset Management rose 4p to 56.5p after the tiny hedge funds group made a series of well-received presentations to institutional investors in the Square Mile. Word has it IAM is looking to complete a number of earnings enhancing acquisitions in the hedge fund arena in the coming months. Big Yellow retreated 1.5p to 187p as Merrill Lynch downgraded the stock after Tuesday's full-year results from the self-storage group. Although the broker said the figures were in line with expectations it warned that Big Yellow suffered from disappointing trading during April, when the seasonal rise in occupancy most were expecting from the company failed to appear. Merrill also fears the group is struggling to find and acquire suitable sites for its self-storage centres. This will certainly slowdown Big Yellow's roll-out programme and so the US broker also cut back its forecasts for the group.

Elsewhere, Lupus Capital ticked 0.25p higher to 11p on whispers that the group is close to unveiling its maiden acquisition. Gossips reckon Greg Hutchings, Lupus's executive chairman, has already held meetings with bankers with the aim of securing debt financing for what would be a giant acquisition for the £25m company. Mr Hutchings hopes to repeat the success he had at Tomkins which saw him turn a tiny company into a billion-pound enterprise.

But he has so far struggled to find acquisition targets for Lupus. Mr Hutchings took a 12.5 per cent stake in the group in January 2004 at 9p and secured options over a large number of shares which can be exercised at 17.25p and will more than double his holding in the company. However, these options expire in July so if they are going to make any money at all Mr Hutchings he needs to get his skates on and complete a deal that will get Lupus's share price moving before then.

Finally, the City heavyweights Goldman Sachs and UBS raised £52m for Micro Focus, a software company. The stock started the day at 130p and closed at 135.25p.

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